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SC Rules on Validity of Land Sale Against Society Charge: Plaintiff Cannot Benefit From Own Wrong

New Delhi: The Supreme Court of India has held that the alienation of agricultural land, over which a charge exists in favour of a cooperative society under Section 48 of the Maharashtra Co-operative Societies Act, 1960, is not automatically void ab initio . Such a transaction is voidable, and only the aggrieved society can challenge it. The Court also emphasized the principle that a person cannot be allowed to benefit from their own wrong.

A bench of Justices Ahsanuddin Amanullah and S.V.N. Bhatti dismissed an appeal filed by the legal representatives of the original plaintiff, upholding the Bombay High Court's decision which had set aside a trial court decree granting possession of the land.

The case, arising from Special Leave Petition (Civil) No. 7728 of 2020 (resulting in Civil Appeal No. 7277 of 2025), involved a dispute over 15 Acres and 17 Guntha of agricultural land in Ahmednagar, Maharashtra. The original plaintiff, Machhindranath , had created a charge on the land in favour of a co-operative society for a loan in 1969.

Subsequently, in 1971, facing financial difficulty, the plaintiff executed a registered Sale Deed of the land to his nephew and son-in-law (Defendant No. 1) for Rs. 5,000. On the same day, a document styled ' Ram Ram Patra ' (Reconveyance Deed) was allegedly executed by Defendant No. 1, promising to re-convey the land upon repayment of Rs. 5,000. In 1972, Defendant No. 1 sold a portion of the land (10 Acres) to Defendant No. 2 for Rs. 30,000.

The plaintiff filed a suit in 1973 seeking possession and re-conveyance, arguing the 1971 Sale Deed was merely security for a loan and void under Sections 47 and 48 of the Act due to the subsisting society charge.

The Trial Court initially decreed the suit, holding the Sale Deed void under Section 48 and finding Defendant No. 2 not a bonafide purchaser. However, after multiple remands and reconsiderations by the High Court, the learned Single Judge and subsequently the Division Bench dismissed the plaintiff's suit, primarily relying on the fact that the society had eventually released the charge on the land in August 1973, after the plaintiff repaid the loan.

Before the Supreme Court, the appellants argued that the Sale Deeds of 1971 and 1972 were void ab initio as they were executed without the mandatory prior sanction of the society under Sections 47 and 48 of the Act, and that the subsequent release of the charge had no retrospective validating effect. They also contended that the original transaction was a conditional sale/loan security and not a genuine sale, pointing to the alleged reconveyance deed.

Respondents No. 3 and 4 (LRs of Defendant No. 2) countered that the plaintiff failed to prove the transaction was a loan, that he couldn't benefit from his own act of alienating charged property, and that the High Court's concurrent findings should not be disturbed.

The Supreme Court acknowledged that Section 48(e) of the Act declares alienation of charged property in contravention of the rules to be void. However, the Court undertook a "deeper probe" into the application of this provision.

Drawing a crucial distinction between 'void' and 'voidable' transactions, the Court, citing Dhurandhar Prasad Singh v Jai Prakash University, (2001) 6 SCC 534 , reasoned that Section 48(e) primarily safeguards the interest of the society that advanced the loan.

The Court held: "...the primal purpose is to safeguard the interest of the society which advanced the loan. As a corollary, the right to sue or get a declaration qua any alienation made by a loanee rests and is available only to the society in favour of whom the property under a declaration was charged. It would, therefore, not be within the domain of the member-loanee who himself commits a breach to take a stand that the act done by him should be declared void, without the society coming forward before an appropriate forum to set aside such alienation."

The Court further cited Sindav Hari Ranchhod v Jadev Lalji Jaymal, (1997) 7 SCC 95 , which interpreted a similar provision in the Gujarat Cooperative Societies Act, holding that only the society could challenge such a sale.

The Court also invoked the legal maxim ex injuria sua nemo habere debet (no party can take undue advantage of his own wrong). Quoting Kusheshwar Prasad Singh v State of Bihar, (2007) 11 SCC 447 , the judgment stated, "It is settled principle of law that a man cannot be permitted to take undue and unfair advantage of his own wrong to gain favourable interpretation of law." The plaintiff, having himself alienated the charged property, could not seek the Court's aid to nullify his own act and benefit from it.

Regarding the alleged reconveyance deed (' Ram Ram Patra '), the Court found it unhelpful to the appellants, noting its lack of registration or stamp paper, the different scribe from the Sale Deed, and the plaintiff's clear statement in the registered Sale Deed that the property was free of encumbrances. The absence of a time limit or provision for escalation in the amount for reconveyance also cast doubt on its genuineness as a true reconveyance agreement.

The Court observed that the subsequent purchaser (Defendant No. 2) appeared to be bonafide, relying on the apparent title transferred by the registered Sale Deed to Defendant No. 1. Moreover, the Society's dues were ultimately cleared, and the charge released, demonstrating that the primary purpose of Section 48 had, in effect, been fulfilled, albeit belatedly.

In conclusion, the Supreme Court found no error in the High Court's decision to dismiss the plaintiff's suit, emphasizing that the plaintiff could not leverage his own non-compliance with the Act to seek nullification of the transactions. The appeal was accordingly dismissed.

Date of Judgment: June 02, 2025.